From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
Markets never operate in a static manner. Instead, markets are dynamic and remain in a natural and constant state of flux.
In knowing this, we must always remain flexible and aware of the changing conditions and developments taking place around us. We pride ourselves on our ability to evolve and adapt to these changes in market structure and are never dogmatic in our approach.
For the last decade, US large-cap growth has been where the alpha is, and derivatives of this theme like large over small, stocks over commodities, and US over international have been very powerful relative trends. We know this well because we’ve been leaning on them for a long time…
But that’s all changed recently, as we’ve been vocal about the importance of repositioning and decreasing exposure to growth in favor of more cyclical, value-oriented stocks.
If history is any guide, Emerging Markets should be a major beneficiary of this new environment as outperformance from cyclical areas has always acted as a tailwind for this group in the past. Though over the last few weeks, we haven’t seen this at all.
Instead, as money has rotated out of growth, and value has remained resilient, Emerging Markets have come under increasing pressure. So, what gives?